The following is from a blog post about a conventional loan interest rate reduction that I had on Active Rain from December 4th. This post created quite a firestorm of responses from those that were excited with the news to those that thought the intervention of the Treasury was the wrong thing to do, to those that thought rates didn’t matter. Real Estate Mortgage interest rates are a hot topic for discussion. Lower rates could drive both purchases and refinances. Not only was there a lot of immediate discussion, but there are still questions coming in. Today, brought this comment:

12/17/2008 03:14 PM

by Steve Laird Bay Area New Home Sales Specialist (William Lyon Homes)

Since there was a question about rates, I decided to respond about what the interest rate had done in less than two weeks. Because I ended up quoting a rate, I had to include disclosure information and parameters. Without that, RESPA would not be fulfilled.

 

Well, you may have heard it is only for purchases, but I had 4.5% 30 year fixed interest rate available this morning for well qualified borrowers of 4.5%/4.662%APR* for either a purchase or a no cash out refinance. Not quite as good this afternoon but close. What will tomorrow bring?

Conventionals loan are $200,000 purchase or no cash out refinance (non manufactured home) with 20% down. Loan amount is $160,000. Credit score of 740 or higher.

*Rates and terms subject to change without notice. Maximum loan amounts vary by state, county, and property type . Subject to review of credit and/or collateral; not all applicants will qualify for financing. It is important to make an informed decision when selecting and using a loan product; make sure to compare loan types when making a financing decision. OR License #ML-4832

12/17/2008 03:46 PM

by Fred Chamberlin – Eugene/Springfield’s #1 Experienced FHA Mortgage Consultant (Alpine Mortgage Planning – Eugene/Springfield OR)

Here is the original post, authored by Fred Chamberlin, Senior Mortgage Consultant, Eugene/Springfield Oregon, 541-342-7576.

The latest rumor (anonymous comment) coming from our “tight lipped” bureaucrats in Washington is that Treasury Secretary Henry Paulson is considering a new plan to reduce mortgage rates in another bid to revive the U.S. housing market. The Treasury could, under this new plan, step up purchases of mortgage backed securities (MBS) to drive down interest rates on some loans to 4.5 percent, the official said on condition of anonymity. The possibility that this plan could change is enormous.
Mortgage applications surged by a record last week and the average rate on a 30-year fixed-rate loan dropped to 5.47 percent, the lowest level since June 2005, according to the Mortgage Bankers Association. So, what will this latest “news” do to the clients that have started application and (probably) locked their interest rate when they hear rates could drop another full percent?

Lowering mortgage rates to 4.5 percent might allow a lot of homeowners to refinance into a cheaper loan but some financial experts expect far fewer people will actually qualify for the lower rates. There are already a number of additions to rates due to credit score, loan to value and purpose of loan. With substantially lower rates, lender will probably tighten these requirements, even more.

I am not certain of what this announcement means to future business opportunities. One “expert” stated that he thought the lowering of the fixed rates to 4.5% could mean that 90% of the mortgages in existence could benefit from refinancing to the new, lower rate. If true, business could get quite brisk.
What are your feelings about having interest rates drop like this? Is it sustainable?

That’s it. What do you think? Is this good for the economy and for Real Estate in general? Is it a short term answer to a long term problem. Mortgage interest rates fluctuate and will continue to go up and down but isn’t this a good thing?

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